Omnicom Group Inc (OMC) — Q2 2023 Earnings Call Transcript

Thank you for joining our second quarter 2023 earnings call. With me today are John Wren, Chairman and Chief Executive Officer; and Phil Angelastro, Executive Vice President and Chief Financial Officer. On our website, omnicomgroup.com, we've posted a press release along with the presentation covering the information we'll review today, as well as a webcast of this call. An archived version will be available when today's call concludes. Before we start, I'd like to remind everyone to read the forward-looking statements and non-GAAP financial and other information that we've included at the end of our Investor presentation. Certain statements made today may constitute forward-looking statements and these statements reflect our present expectations. Relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 2022 Form 10-K. During the course of today's call, we will also discuss certain non-GAAP measures. You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials. We will begin the call with an overview of our business from John, and then Phil will review our financial results for the quarter. After our prepared remarks, we will open up the line for your questions. And I will now hand the call over to John.

Thank you, Greg. Good afternoon, everyone, and thank you for joining us today. We're pleased to share our second quarter results. Organic growth was a solid 3.4% for the quarter, which was in line with our expectations. Adjusted operating income margin was also in line with our expectations at 15.1%. Adjusted diluted earnings per share for the quarter was $1.81, up 7.7% versus the comparable amount in 2022. On a constant currency basis, the increase was 8.9%. Our cash flow continues to support our primary uses of cash: dividends, acquisitions, and share repurchases. Our liquidity and balance sheet remain very strong. We are pleased with our financial results for the quarter and first half and are increasing our full-year organic growth target to 3.5% to 5%, while maintaining our 15% to 15.4% operating margin target. Phil will cover our results in more detail during his remarks. Operationally, we had a very successful quarter. We made significant progress on our AI strategy by adding generative AI to Omni, our market-leading technology platform, and entering into significant first-of-a-kind technology partnerships. We enhanced our capabilities and management team in e-commerce and retail media, solidified our position as the Most Creative Holding Company in the world at Cannes, and completed a couple of important strategic acquisitions. While we have engaged in AI for decades, generative AI will have a profound effect on our industry and Omnicom. We are quickly embracing the technology as we see massive opportunities to boost the productivity of our people and deliver better work to our clients. As with any new technology, we're working closely with our clients to take advantage of the benefits while being mindful of its limitations, risks, and privacy concerns. We have a significant competitive advantage in harnessing the power of generative AI through our open operating system, Omni. For over a decade, we've invested in the development of Omni. Today, more than 50,000 people use the platform in over 100 countries and it has over 1 billion IDs globally with data from first, second, and third parties. Generative AI will turbocharge Omni users by helping them harness, deploy, and activate this rich set of data. The open architecture of Omni makes it feasible for us to quickly adapt generative AI models from our key tech partners in a scalable, reliable, and secure environment. Equally important, our clients remain in control of their first-party data. In June, at the Cannes Lions Festival of Creativity, we announced the launch of Omni 3.0, the next-generation operating system for Omni where every experience will be powered by generative AI. The experience is delivered through Omni Assist and is the result of our partnership with Microsoft, which allowed us to be one of the first companies to be given full access to their ChatGPT model. Omni Assist is a custom-trained enterprise-level Omnicom proprietary version of ChatGPT that enhances every task within Omni, including research, creating, planning, and executing marketing campaigns. Omni Assist will give our agency teams the power to do their jobs more efficiently and focus on high-impact work for our clients. Following the launch of Omni 3.0, we unveiled several other collaborations at Cannes that will introduce generative AI capabilities directly into our creative work. The first was Google Marketing Cloud, which offered us unique access to the Vertex AI platform and Imagen. Imagen is a text-to-image model with copyright protections built-in, enabling agency and client teams to accelerate the content development process for marketing campaigns. Next, we announced that we were the first holding company to have access to Adobe's Firefly creative generative AI models. Combining these models with Omni data, we will be able to embed the power of Firefly into our clients' ecosystems to generate automated content in a brand's unique style and language. Finally, we shared our first-mover collaboration with Amazon Web Services. Pairing Omnicom's open operating system with AWS’ generative AI services will enable the automation of advertising campaigns and the creative journey development on behalf of our brands. These collaborations feed directly into Omni and will accelerate our generative AI capabilities. Also announced at Cannes, we further expanded and strengthened our e-commerce and retail media capabilities by launching Omni Commerce, the industry's first connected commerce and orchestration solution. Omni Commerce provides a single standardized and customizable view of the commerce journey. With the retail media landscape becoming increasingly fragmented, Omni Commerce helps our clients harness the full power of retail media with a holistic view of their ROI. In June, we announced the appointment of Jacquelyn Baker as CEO of the Omnicom Commerce Group. Jacquelyn succeeded Sophie Daranyi, who is stepping down to pursue consultancy and non-profit opportunities. With over 20 years of commerce and brand-building experience, Jacquelyn has an established track record of driving innovation within the commerce landscape. While we have made substantial progress with Omni and generative AI, it's critically important to note that AI can never replace the inspiration and genius that comes from our people and their creativity. These technological advances will simply make it easier and faster for them to develop and deploy creative ideas. That's why I'm especially pleased we were recognized as the Most Creative Company in the world at the Cannes Lions Festival of Creativity. Omnicom agencies from more than 40 countries won over 175 Lions throughout the week. Two of our creative networks, DDB and BBDO, placed in the top three in the Network of the Year competition, with DDB coming in first and BBDO coming in third. We continue to invest in our global creative capabilities. In early July, we announced the acquisition of German-based Grabarz & Partner, a world-class creative agency headquartered in Hamburg. Grabarz has been named to prestigious industry lists such as Cannes Lions, Top Ten Independent Agencies of the Decade, and Campaign U.K.'s The World’s Leading Independent Agencies. Following the announcement of Grabarz and together with certain management changes, Germany's leading trade magazine noted that Omnicom has significantly strengthened its position in the world's fourth largest advertising market. Also in July, we expanded our media services through the acquisition of Ptarmigan Media, headquartered in London with several offices around the world. Ptarmigan is a specialist agency providing end-to-end media and marketing solutions to financial services brands. The agency's capability within the Omnicom Media Group will enable an unprecedented and singular depth of financial service industry and media planning and buying expertise. Overall, we're very pleased with our first half financial results and our progress in key strategic initiatives. While we remain optimistic for the second half of the year, we continue to plan cautiously given the number of uncertainties in the macroeconomic environment. I will now turn the call over to Phil for a closer look at our financial results. Phil?

Thanks, John. As you just heard, we had a solid quarter and first half of the year, and we are on track with our expectations for both revenue growth and operating margin. Let's now go into some more detail on our results. Starting with the summary income statement for the second quarter on slide three, reported revenue increased by 1.5% and by 3.4% organically. Reported operating income increased by 1.7%, and operating margin was 15.3%. Reported net income in Q2 increased by 5.1%, and our Q2 diluted earnings per share was up 8.3% on a reported basis. During the quarter, we recognized a gain of approximately $79 million on the disposition of our research businesses, which were included in our execution and support discipline. We also incurred repositioning costs of approximately $72.5 million related to severance. We have also included slide nine in the deck, which summarizes our reported results alongside our non-GAAP adjusted results, which exclude the net impact of $6.5 million pretax from these two items. We'll review that analysis in a few minutes. Let's now turn to revenues on slide four. Our organic growth in the second quarter was 3.4%, which brings our year-to-date organic growth rate to 4.3%. The impact from foreign currency translation only reduced reported revenue by 0.7%, compared to a reduction of over 3% in Q1 2023. If rates stay where they are currently, we estimate the impact of foreign currency translation will be a benefit of approximately 1.5% for Q3 and Q4 and close to flat for the year. The impact of acquisition and disposition revenue was negative 1.5%, primarily reflecting the sale in Q2 of our research businesses. We expect a similar reduction of 1.5% for the balance of the year, although acquisitions we recently completed will moderate this somewhat. Now let's turn to slide five to review our organic revenue growth by discipline. During the second quarter, advertising and media, similar to Q1 of ‘23, posted 5.1% growth, driven by strength in our media business. Precision marketing grew by 2.3%. Certainly, clients, especially those in the tech and telecom industries, have become more cautious with their spending, as reflected in our tech consulting and transformation agencies. This also reflects, in part, the business coming off a strong 21% growth comp last year. We expect our investments in generative AI will naturally benefit this discipline and we anticipate growth in this discipline to accelerate in the future. Commerce and brand consulting grew by 2.4%, driven primarily by our branding and design consulting agencies. Experiential growth was 9.2% driven by strong results in Europe and France in particular, as well as China for clients in the automotive and luxury categories. Execution and support revenue fell 3.8%, due primarily to declines in our merchandising and field marketing agencies. Public relations was flat in Q2, coming off a 16% growth comp last year, which reflected the benefit of some revenue from the U.S. election cycle that wasn't present this year. Finally, healthcare performance was solid at 3% and our outlook for this discipline remains very good over time. Turning to slide six, we once again grew organically in every region globally. Notably, there was strong growth in Asia Pacific, led by China, benefitting from easier comps due to the lockdowns in Q2 of 2022. Looking at the revenue by industry sector on slide seven, compared to the second quarter of 2022, we had high relative weights in food and beverage, pharma, health, and automotive, offset by lower relative weights in technology and telecom. Other categories were relatively stable. Turning to slide eight, which is our Operating Expense Detail, you can see a more granular view of our operating expense levels. Slide 16 in the appendix also shows these expenses on a constant dollar basis. Salary-related service costs were again down as a percentage of revenues year-over-year. We saw reductions driven by some of our repositioning actions and through changes in our global employee mix. Third-party service costs increased due to an increase in organic revenue, particularly in proprietary media and events. These costs include third-party supplier costs when we act as principal in providing services to our clients. They are an integral part of our service offering to our clients, and we generated profit on them. Third-party incidental costs, which we began breaking out separately last quarter, decreased a bit compared to the prior year. These costs primarily consist of client-related travel and incidental out-of-pocket costs that we build back to clients directly at our cost with no profit. Occupancy and other costs were up slightly in dollar terms but flat as a percentage of revenue. As discussed last quarter, we saw increased occupancy costs associated with higher levels of in-office work offset by lower rent from the reductions in our real estate portfolio in the first quarter of 2023. SG&A expenses decreased in both dollar terms and as a percentage of revenue, due primarily to lower professional fees. Now let's turn to slide nine. As I mentioned earlier, this is a clear presentation which summarizes our reported and non-GAAP adjusted results for both the three and six months ended June 30th. As a reminder, the non-GAAP adjusted amounts in the second quarter of 2023 include a gain of approximately $79 million on the disposition of our research businesses, as well as repositioning costs of approximately $72.5 million related to severance or a net impact of $6.5 million pretax. Operating income was up 1.7% on a reported basis and up 50 basis points on a non-GAAP adjusted basis. The related operating income margins were 15.3% and 15.1%, respectively, both of which were close to flat with the operating income margin of 15.2% from the second quarter of 2022. For the full year, we're comfortable with the expected range of our operating income margin of between 15% and 15.4%. Net interest expense was $27.4 million for the quarter, a reduction of $12.7 million primarily from higher levels of interest income, compared to Q2 of 2022, given comparable higher short-term investing rates were in place in the second half of 2022. In the second half of 2023, we expect that net interest expense will be flat to up slightly relative to the second half of 2022. Our reported income tax rate was 27%. The non-GAAP adjusted tax rate, excluding the gain, the repositioning costs, and the related taxes, was 26.3%. We still expect a rate of 27% for the balance of the year. Reported net income in Q2 increased by 5.1%, and non-GAAP adjusted net income increased by 4.7%. Our diluted earnings per share was up 8.3% on a reported basis and up 7.7% on a non-GAAP adjusted basis. Year-to-date reported diluted EPS is up 16.3% and up 9.4% on a non-GAAP adjusted basis. This diluted EPS growth was also driven by lower shares outstanding resulting from share repurchases. Slide 10 shows our cash flow performance so far this year. We define free cash flow as net cash provided by operating activities, excluding changes in operating capital, which historically we expect to be neutral for the year. Free cash flow for the second quarter of 2023 was $880 million, an increase of 14.7% from last year. Regarding our uses of cash, we used $285 million of cash to pay dividends to common shareholders and another $32 million for dividends to non-controlling interest shareholders. Our capital expenditures were $40 million. Acquisition payments were $55 million, excluding net proceeds from dispositions of approximately $180 million. Stock repurchase activity, net of proceeds from stock plans, continued in the second quarter, bringing our year-to-date amount to $506 million. Slide 11 is a summary of credit, liquidity, and debt maturities. At the end of the second quarter of 2023, the book value of our outstanding debt was $5.6 billion. There were no changes in outstanding balances during the quarter other than foreign exchange translations. Our $2.5 billion revolving credit facility, which backstops our $2 billion U.S. commercial paper program, remains undrawn and our cash equivalents and short-term investments were $2.8 billion. Our next debt maturity is not until November of 2024. Slide 12 presents our historical returns on two key metrics for the twelve months ended June 30th, 2023. We generated a return on invested capital of 22% and a return on equity of 46%. These metrics are a strong reflection of the strength of our business and our conservative capital structure. Slide 13 is the summary of all our recent technology partnership announcements. As a reminder, our historical development of Omni, our current investments in technology and services that prepare our business for the future are largely reflected in our operating income. We expect to continue to grow our revenues, improve our operations, return cash to shareholders through dividends and share repurchases while managing the current economic environment. As John discussed, we will continue to prepare for a dynamic future. Operator, please open the lines for questions and answers. Thank you.

Thanks. Thanks, good afternoon. One for John and one for Phil. John, as you noted in your opening comments, Omnicom has always had a really strong position on the creative side of the business, especially with your global networks. And I wonder, do you think that generative AI even lowers that advantage or brings new entrants into this industry? So I guess, I know you feel it is a positive outcome, but we're worried about competition or just people breaking up and doing it on their own. And Phil, any help on the repositioning charge? What is that related to? Is this the end of it for the year? And what type of incremental benefit do we see in the margins from these actions? Thanks.

Technology will impact every aspect of our business, I believe. When you stay focused on the best and the brightest, used to call them creators, we now call them knowledge workers, they're always going to be what differentiates companies like ours from everyone else. I don't think that the technology is simply there to make it simpler and faster to gain insights from which creative ideas will be generated. So will it have an impact? Yes, of course, over a period of time. But it won't reduce the importance of creativity to the IP of Omnicom.

As for the second question, Michael, the repositioning charge was primarily related to severance actions that we took to align our cost structure with our revenue expectations for the year. We were pretty aggressive in trying to ensure that we made the appropriate changes that we thought were needed. Some of it was a swap out of skills and some of it was a realignment of the cost structures to be more conservative in the forecast for the balance of the year. We don't expect the level that we experienced in Q1 and Q2 as far as repositioning in the second half. But we are always going to be looking at the cost base pretty aggressively, especially in the uncertain times we're currently experiencing. As far as margins go, our expectations are still where they were at the beginning of the year. We expect to be within the range of 15% to 15.4% that we discussed back in February. We don't have any reason to change that as far as the full-year margins go.

Okay. Thanks, Phil. Thanks, John.

Thanks. John, I wanted to see if you could just give any additional context around the organic guide. I think in May, you framed it as comfort with 3% and 5% as stretch. Would you now sort of put it similarly with sort of 3.5% as a point of comfort and 5% still as a stretch?

Yes, I would. I'd say I couldn't answer it any better than you asked it based upon known uncertainties out there. For those of you who have been following us for a long time, there's always budget flush and projects in the fourth quarter, which are not our focus at the moment, but we'll increasingly become focused as we get into and out of the summer. Just as a bit of color, I think in the last 22 years, I can only recall two years where that project revenue didn't come through. But those were the years that occurred during economic uncertainty at levels comparable to what is potentially out there for the balance of this year.

Okay. And then I think a couple of months back, you mentioned some clients pausing, but not necessarily cutting their digital transformation work as a reaction to GenAI. I wanted to see if you could just update on that and how clients are approaching some of these larger projects?

Yes. If you look at, I think, a chart, it's probably number seven, which outlines and compares our revenue by industry. I think Phil mentioned this in his comments, where we saw the biggest pause was really in our tech sector and in our telecommunications sector. We didn't lose any clients in those areas, but they went through some pretty severe restructurings during the first half and were conservative about most of our costs. If I have to make a general statement, since the beginning of the year, CEOs have been looking for flexibility. They aren't walking away from their commitments. PepsiCo even mentioned earlier today in its conference call that it was increasing its spending. So, I believe we're in a very good place, a sound place. But as certain clients suffer, we will go along for a bit of the ride. However, we haven't lost anything. We've been winning business, which helps us as well.

Thank you.

Thanks. Good afternoon. John, if you guys are successful with AI, what would we see in your reported results over the longer term, maybe a three to five-year basis? Is this an organic growth driver from a top-line point of view? Is it a productivity and margin opportunity, including outsourcing? And you can't say all of the above, but I would love to get your thoughts on what success looks like here.

Ben, you stole it from me. I was going to say all of the above. Certainly, productivity, for sure, because naturally, it will make the gathering of data and the refinement of data, which leads to better insights, in a much more rapid, less labor-intensive way. In terms of our growth, I believe that for the last several years, we have increasingly been able to prove to the client the ROI of a dollar spent. So as a result of that productivity and with the complexity that will come with all the questions surrounding how we use generative AI in various markets given different laws and regulations, our ability to navigate those markets and issues, increased efficiency and effectiveness, and improvements in our ability to measure the benefit of a dollar spent, I believe will lead to increased organic growth over the near and long term.

That's helpful. And then, if I could just ask you guys a follow-up. You talked about a pause in spending, particularly in tech and telecom. And I think we're all probably a little bit surprised to see the Precision Marketing number this quarter. But advertising & media, your biggest revenue source, was one of your fastest-growing. I guess I'm curious, like, why do you think clients continue to spend there and are pulling back in areas that, I don't know, I would have thought maybe some of this business transformation stuff would have been more sticky than on the advertising side? I don't know if maybe there's more nuance there. But I would love your thoughts on the continued strength in media versus the softness we're seeing in some of the other areas.

I might address that in the reverse of how you posed it. First, in terms of Precision Marketing, we expect it to continue to grow. It is a core long-term part of our business. What really happened in the first part of the year is that, for instance, take Facebook, which cut 20,000 jobs. If you're the CEO of a company cutting that many jobs, you can't let everything else continue in a normal sense. As a result, there may have been pauses and reassessments. What's key is that, because we're a service company, we'll succeed with our clients and we'll experience challenges together. The beauty of Omnicom is the depth of our client base and the geographic diversity in which we operate. We cannot expect everything to remain constant as companies undergo whatever level of reorganization they need to. Regarding media, the wins and new business that we've secured at the end of last year continued into this year. Thus, we're seeing sustained strength in that area.

Great. Thank you.

Thank you. Maybe first just, John, on the slowdown in U.S. organic. I think it was kind of mid-2% in the second quarter. It was about 5% in the first quarter. Is that entirely attributable to the weakness you called out in tech and telecom since you suggested that you didn't really have any meaningful account losses? Or is there anything else going on in the U.S. market that we should be attuned to that might lead into how we look out for the back half of the year? And then, Phil, I just wanted to be really clear on the margin guide, the 15.1% to 15.4%. I think on the last call, you ended by saying that you were comfortable at the top end of the range. You did say that now you're going to have some generative AI investments this year. I just want to see if it's still realistic that you'd be at the top end of that range, closer to 15.4%. And should we exclude some of the repositioning charges from that guidance? Thank you.

It's tough to project or to forecast, but in the U.S. events and entertainment sector, we had a reduction of 9.1%. So while I pointed to those two areas, it's evident when looking at our presentation materials. I would never say always, only, or never. That's just one of the areas which pulled our growth down a bit in the U.S.

Yes, more growth was observed outside the U.S. and events overall were down a bit specifically in that region, which had an impact. Additionally, the Precision Marketing reduction was certainly influenced by tech and telecom clients that had dialed back some spending in that area. On the topic of margins, I can confirm that our overall outlook for the year has not changed. We've always been conservative about those projections, as we're trying to find the right balance between sustainable growth and making investments necessary to support that growth while also delivering shareholders the appropriate margin.

Great. Thank you.

Alright. Thanks. I'd like to come back to the generative AI topic, please, on your Slide 13. And John, you ran through a number of these names. It's practically a who's who of big tech companies that you're partnering with. I wonder if you could fill us in a bit more on what it is about the Omni platform that makes it attractive to these kinds of companies. It looks like these are largely creative efforts. I wonder if you could speak if there are other components in terms of media planning and buying functionality as part of these? Thanks.

Sure. There are slightly different reasons for each one of these partnerships, but a central theme is that we do have the Omni platform, which serves over 50,000 people around the world. This makes us attractive. Our open architecture is key to why we were considered and offered these opportunities. Because connecting to them and enhancing how their products are utilized, while being flexible across a large number of clients using different systems or applications, that open architecture means we are not trying to protect a base and then trying to incorporate something new. We have always aimed to operate in an environment where we couldn’t predict what was going to change or come. However, we built the flexibility into the architecture we developed, so whatever came along could be easily incorporated. This is a key factor in putting us at the front of the queue with many of these companies. I fully expect that as they progress with their products, they will open their doors to others in the industry, which is not surprising. But the Omni platform, I know we talk about it a lot, but I cannot explain enough its value and the fact that we maintain complete flexibility is a significant reason why we are chosen.

Great. And in terms of the functions you'll be performing with them, again, a lot of them seem like efforts to improve creativity. Could you talk a little bit more about the cleanroom technologies or some of the delivery data that you're referencing in the slide here, a bit more on what beyond using generative AI for creative functions?

Yes, sure. And thank you for that question because I didn't include something in my answer that I should have. Also, this is philosophical; I say this with all my heart and know that we do it 100% of the time. When we ingest clients' first-party data and enrich it with the second-party and third-party data we have, that data remains the property of our clients. We don't take and reuse or resell that data; it is exclusively theirs. That's what we're doing in the cleanrooms. More sophisticated clients are increasingly attracted to that guarantee. This fundamentally makes us attractive partners. We also have a major supplier here or partner that had never opened up their cleanrooms to anyone but to us. As a result of this partnership, we have pointed that out at a very high level, and we are now doing cleanrooms with them. While it seems focused on creativity, there's a lot more happening, and that's why it gets mentioned in our short descriptions in the presentation. It goes much deeper than that because many of the products we are embedding and looking to incorporate drive efficiencies. We will be creating APIs for CRM, for commerce, for PR, across the board.

Yes. That helps a lot. Thanks, John.

You're welcome.

Thank you. John, I'm curious if you can talk a little bit further about the tone of business out there, the tone of the client conversations that you're having here in the U.S. and Europe and how that may or may not have changed versus going into the start of this year, please?

Certainly. I think the constant theme throughout the year has been clients wanting to create flexibility. That doesn't mean they want to cut back on their spending at all, but they are looking for the flexibility to react. You see it primarily in the media area where clients held back in terms of their upfronts and preserved their rights to enter into the scatter markets as we get later into the year. It's not an election year, so they know that inventory will probably be available. However, I'm out of my depth with that last statement because we have experts who can speak much more eloquently on that than I can. But the preservation of flexibility has been a constant theme throughout the year. The negative impacts of COVID were somewhat mitigated for most sophisticated large companies due to governmental support throughout the world, which allowed them to make commitments. With that support gone, as it should be, companies have adjusted their businesses in various ways, depending on the industry. The consumer still has money to spend, but we observe changes in behavior, like the travel industry booming as everyone who was locked down for three years is now traveling. However, you'll see conservatism in perhaps some other areas of spending. We keep a close eye on these trends, as every one of our clients does, to adjust our portfolio and services as needed.

Then my follow-up question, John, can you just touch on wins and losses out there for Omnicom in the first half of the year? What is your characterization of the number of accounts that are up for review that you're willing to talk about for the first half of the year? Is it slower than normal, above average, or about the same as historically? What's going on out there in your view? The trade press clearly is not capturing as much as they used to.

No, they're not because the world is a lot more complex now. Many reviews that are taking place are closed reviews. We have been fortunate that we continue to outperform; that's a standard expected here. We've had very few losses and quite a number of wins, especially in media. If you notice any slowness year-over-year in a particular section of our business, it's specifically due to government activity related to elections, which only happens every cycle. That said, we continue to win business as we speak, particularly in CRM. There are several exciting pitches on the horizon that we are hopeful for. They are offensive for Omnicom, not defensive. Hence, we feel secure in our revenue base and what to expect as new business funds will be invested to continue our competitive edge.

And John, if I could just sneak in one more about the two ongoing strikes in Hollywood. If this drags on for more months and people begin to reflect on their ad budgets for traditional television, as well as streaming, how do you view that impact? Could there be a case that this might actually be a positive for Omnicom because it adds complexity in needing more collaboration with clients to navigate through this environment?

Yes. I hope this ends more quickly than predicted. We remain completely agnostic to any form of media. With the technology, database, and information we gather paired with clients' first-party data, we can create new ways to attract audiences. If one route becomes temporarily blocked, we know how to navigate another.

Okay. Great. Thank you, John. That's helpful.

There's so much hype out there about generative AI. I'd just like to ask a basic sort of calibration question. Let's say, five years from now, what percent of your revenues do you think would be using generative AI roughly?

I believe the last individual to create five-year plans was not clear. We are reacting to AI with great urgency. Companies are intricate and develop at varying speeds, often not at the forefront of available technology. Digital transformation, which began in the mid-90s, is ongoing, but I have not yet thought about how to respond to your question. We strive to be leaders in this field, providing clients and prospective clients with the finest tools and technologies on the market. We are confident that if we deliver exceptional service, fair compensation will follow. That's about as far as my five-year plan extends. I prefer to concentrate on the present and the immediate future, but not quite that distant.

Okay. Thanks.